Ethics and morals - Managing Earnings

Managers and executives typically engage in ethical and moral behavior, which is constantly scrutinized. However, most people disregard the values they have adopted in terms of timing procedures for non-operating occurrences (Bruns & Merchants, 1989). Additionally, managers’ customary ethical framework, particularly when disclosing short-term commercial earnings, has always garnered less attention recently. When compared to their colleagues, accountants, who are required by laws and regulations to create financial reports that include all generally recognized standards for accounting principles, this is true. Such accounting disclosures are typically examined and examined by impartial auditors (Bruns & Merchans, 1989). This paper will examine an article focusing on morality regarding managing business earnings while carefully investigating the five generalized findings included in the report.

Discussion

The first findings in the article established that short-term evaluation and management of business earnings in regards o accounting requirements was particularly unacceptable (Harvard Review, 1990). This is according to various interviews conducted by the authors of the article to different managers. On the contrary, these managers found it more acceptable to manipulate as well as change various operating procedures as well as decisions.

The second finding indicated that effects regarding business or firm’s earnings have significant effects as far as the direction of the business is concerned (Harvard Review, 1990). This is business managers, or executives get informed about the performance of business operations. As a result, they can make informed and accurate decisions. In this case, business managers have higher references of higher earnings as compared to low income. This is because high earnings indicate high business performance while lower earnings indicate underperformance.

The authors of this article further established in the fourth generalized findings that materiality matters under any business context (Harvard Review, 1990).

If short-term earnings have significantly high effects on business practices, most managers indicated that such situation is considered less acceptable#. This may be because significantly high effects reduce operations’ productivity as well as profitability. When this happens, a business has a high likelihood of incurring high costs or loses as it struggles to retain itself in the competitive business environment. On the other hand, lower effects as a result of slow, short term earnings may help companies to get back on their feet quickly because of lower costs that may be leadership strategies or changing the organizational culture as opposed to incurring monetary costs.

Findings also indicated that longer effects because of low short-term earnings have a significant effect regarding ethical business judgments or decisions by either business executives or managers (Harvard Review, 1990).

This is mainly because a firm may find itself on the verge of collapsing and this requires managers to make personal sacrifices that may involve downsizing employees, reducing organizational costs as well as obtaining external financial support. All these are ethical decisions that require leaders with sound ethical and critical thinking skills that result in sound moral judgments. Moreover, managers find it more acceptable to deal with ending quarterly short-term earnings when compared to ending annual short-term gains.

The final findings indicated that the method used by managers when handling earnings has considerable effects in firms or businesses (Harvard Review, 1990). In this sense, most managers found it more acceptable when the management uses overtime to increase shipments or sells its assets with the aim of increasing profitability as opposed to extending loan deadlines to increase firms’ profitability.

Management’s Ability to manage long-term Earnings

Frequently, managers find I more attractive or favorable judging operating manipulations during high-short term earning reporting (Lybrand Gold Medal, 1990). This is mainly because high numbers during high short-term earning reporting indicate positive outlook in regards to company’s performance as well as both ethical and informed business decisions and practices.

References

Bruns J. W. & Merchant A. K. (1990). The Dangerous Morality of Managing Earnings. Managing Accounting: Aug, 1990; 72, 2; PP 22.

Harvard Review. (1989). The Complete Questionnaire Appeared in Harvard Business Review, March-April 1989, pp 220-221.

Lybrand Gold Medal. (1990). Earnings and Business Practices. Rouridge Publishing.